Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Whether the value of the reward redeemed should be included in income as a taxable benefit.
Position: Yes.
Reasons: Where an employee receives a prize or other award related to sales or other work performance from his or her employer, the fair market value of such an incentive is regarded as remuneration to be included in income.
2006-018101
XXXXXXXXXX Luisa A. Carpino, CA
(613) 948-2227
September 12, 2006
Dear XXXXXXXXXX:
Re: Reward Points
This is in reply to your letter dated April 6, 2006, with respect to the taxation of a reward received by your wife from her employer. Specifically, your wife redeemed certain reward points, received from her employer, for a television. The value of the television, determined by the employer, was included in your wife's income as a taxable benefit. It is your view that the television has a value of less than $500 and there should not be an income inclusion, as the television would qualify as a gift.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5 dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. The following comments are, therefore, of a general nature only and are not binding on the Canada Revenue Agency with respect to your particular situation.
In general, paragraph 6(1)(a) of the Income Tax Act (the "Act") requires a taxpayer to include, in computing income for a taxation year, as income from an office or employment the value of benefits of any kind whatever received or enjoyed by the taxpayer in the year in respect of, in the course of, or by virtue of an office or employment. This would include any non-cash benefits received by an employee in a taxation year.
However, the Canada Revenue Agency's ("CRA's") current policy concerning employer-provided gifts and awards allows employers to give two non-cash gifts per year, on a tax- free basis, to employees for special occasions such as Christmas, Hanukkah, birthday, marriage or a similar event where the aggregate cost of the gifts to the employer is not more than $500 per year. Similarly, employers can give employees two non-cash awards per year, on a tax-free basis, in recognition of special achievements such as reaching a set number of years of service, meeting or exceeding safety standards, or reaching similar milestones where the total cost of the awards to the employer is not greater than $500 per year.
Where an employer rewards an employee for achieving or exceeding an economic objective directly related to his or her employment duties, it is our view that the CRA's policy concerning employer-provided gifts or awards would not apply and that such a reward would be considered part of the employee's remuneration. Accordingly, the reward points received by your wife in the circumstances noted above are directly related to her employment duties and the value of the item received upon redemption of the reward points would be required to be included in calculating an employee's income from employment.
Finally, since the onus is on the employer to determine the value of any item received upon redemption of the reward points, we suggest that you discuss the valuation issues with the employer directly.
We trust this information is helpful.
Yours truly,
Phil Jolie
Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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